As eCommerce sellers, we always need to source products and negotiate with suppliers. Most of the suppliers will often state they can supply us if we meet their minimum order quantities (MOQ). Now, the MOQ is the lowest number of units suppliers are willing to produce in an order. This strategy allows suppliers to decide if it is cost-effective to run the manufacturing process for an order. At the same time, it helps them sieve out potential customers with huge buying capacity.
Yet MOQ can become a headache for newbie sellers. Especially if the figures quoted are in the thousands, like 5,000 or 10,000, new sellers won’t be able to afford them. Fortunately, there are several ways to get around this number. Here are 9 tips on how you can negotiate with suppliers to lower the MOQs.
First of all, never take MOQ stated by suppliers for real! There will always be room for negotiation. Suppliers will lower their MOQs for you if they find your reasons valid and want to do business with you.
For example, you can request product samples and offer ‘repeat’ collaboration prospects. The main idea is to show that you are serious about doing business. Ultimately, all suppliers like to know that they are working with reliable sellers. Keep your negotiation reasonable though. It will be unfeasible to request suppliers to reduce their MOQ from 100 units to 10 units. But a reduction from 100 units to 50 units may work, if you offer prospects of repeat collaboration!
New sellers can always try to mention that this is the first order you are working with them. If everything goes right, you will be back with more orders in the future. You will be surprised to find that many suppliers are usually very understanding. Some may accept your offer at once, as they can see that you are being sincere with your request! After all, all suppliers will want orders, and they won’t push you away – if they see that this is going to be an actual order.
Do keep in mind that what bothers suppliers the most is usually the money they can earn, instead of the actual MOQ. If producing fewer units makes sense financially, they will be glad to accept your offer. Thus, you can consider a higher price for a smaller MOQ, so long as you can afford it. In the long run, this approach may even help you save on transport, storage, and other costs.
Generally, it’s about finding that middle ground where both parties become satisfied. But take note – some suppliers can be quite clever in their words of phrasing a higher production cost. For example, they may tell you straight up that you will have to pay XXX percent more for an order with a smaller MOQ. Or they may say they will charge you more per unit for your request. In either case, both meant the same thing – more expensive pricing. So watch out before you make the final decision!
In case you don’t know, sellers can request to combine different products to meet the MOQ. This is often used when sellers have plans to buy a variety of products from the same supplier. This way, they don’t have to take a huge volume of one product all at a go. At the same time, sellers can spread the risk of spending too much capital on a single product. Instead, they now have more products to sell and can have a better chance of success!
Now, this strategy works best for buying the same product in different colors and sizes. Suppliers will likely accept your ‘mix-and-match’ request in this case. After all, they will always have some stray units from various production batches. Your request is a great option for them to clear off these units!
Saying that not all niches welcome such ‘mix-and-match’ requests. Never assume and always check with your suppliers first!
Many sellers like to buy from large, well-established suppliers or factories. These factories may offer lower pricing due to their economies of scale. Yet at the same time, their MOQ is more or less fixed. So if you trade with these suppliers, you probably will not be able to get lower MOQ.
But things will be different with smaller factories. With a smaller production output generally, they may be more flexible about their MOQ. Furthermore, such companies are hungrier for business than their counterparts. So, they will be less likely to turn you away due to your request for a lower MOQ.
Always make sure that these factories follow the necessary product regulations though. A lower MOQ shouldn’t be your main priority when it comes to sourcing. You will get disappointed if these factories give you sub-quality products after everything!
If you are trying to sell customized products, do expect to have a higher MOQ. After all, items that are custom-designed can be expensive to produce. Such products may also need components that these suppliers don’t usually use. As such, your order will be subcontracted to other original equipment manufacturers (OEMs). To offset the production costs, your supplier will then need to raise the MOQ for your order.
In comparison, products that use generic components will less costly to produce. Such products will only need standardized components that the suppliers are familiar with. They won’t need to subcontract your products to another OEM in this case. With reduced production costs, suppliers will likely agree to your lower MOQ requests. Hence, do be mindful of the costs involved the next time you decide to make customized products!
It’s common logic that the more materials you use in a product, the higher the production costs. And anything that increases the production cost will most likely lead to a higher MOQ. Let me explain.
Let’s say if you want to sell a piece of clothing made up of different fabrics. Your supplier will then need to subcontract each different fabric from individual subcontractors. Each subcontractor will demand their production costs. In turn, your supplier will need you to pay more – by buying more units from them.
But if you use the same material for a wide array of products, it will work to your benefit. For instance, in the above clothes-selling example, if you use the same fabric for different lines of clothing, like tops, bottoms, dresses, etc… Your supplier will only need to use one material throughout. This will help them save so much effort and resources trying to find different fabrics. Their production costs can be reduced, and in turn, they are more likely to consider a lower MOQ too. Meanwhile, you will get to enjoy a wide assortment of products too!